Understand “Drop Shipment” in Order Management? -Part II

Posted on April 5th, 2008 by Sanjit Anand | Print This Post | Email This Post

Most of us heard about e-commerce site like ebay,ubid.com,amazon,com which is very common place in advance countries like USA, UK & Singapore where people can sell or buy there product. Have you ever think ,what is similar situation in real world , when the the word ‘drop shipment’ comes to your mind. ……a business situation when the retailer or trader has no stock himself, instead giving customer details directly to the seller, and then saler than fills the order and send it to customer directly.How its sounds…

Drop shipping still remains a hot topic among SCM practitioner and apps Implementer , but even though it has many benefits, it isn’t the best option for every business. I am not going to walk through the pros and cons of the process , rather would like to walk through some of the key steps and processes which exist in real world which is important to understand the concept which helps during configuration with the product.

As in one of the last post , we have seen drop shipments is a method of fulfilling sales orders by selling products without the order taker handling, stocking, or delivering the products. The seller buys a product and the supplier ships the product directly to the seller’s customer .

In other word ,drop Shipment is a process where the customer places a purchase order on a company and this company instructs its supplier to directly ship the items to the customer.

Drop shipments are done because of the following reasons:

• Customer requires an item that is not normally stocked
• Customer requires a large quantity of the item which is not available with you
• It is more economical when the supplier ships directly to the customer

Types of drop shipment

If you see the real world scenarios this can be best categorize as mainly under three heads as:

• Type 1 : Full Drop Shipment

Where the seller sends the purchase order to the supplier for the full quantity that the customer had ordered

• Type 2 : Normal Shipments and Partial Drop Shipment

Under this scenario, If the seller has only part of the quantity available for shipping to the customer, then that quantity is shipped; a purchase order is created for the remaining quantity which the seller was not able to fulfill. This is typically true for single based item.

• Type 3 : Normal Shipments and Full Drop Shipment

In this scenario, the seller ships some goods from inventory to the customer, and the other goods are always shipped from an external source (supplier).

Process Flow for Drop Shipment (Adopted from User Guide)

Drop Shipments for Standard Items

1. Enter an order for drop ship item
2. Book the order
3. Run Requisition Import
4. Create a purchase order from the requisition
5. Approve the purchase order
6. Receive against the purchase order

Forward drop ship flow for ATO model

1. Enter a sales order for your drop shipped ATO model.
2. Select your options.
3. Schedule and book order (schedule date should default to request date for all lines).
4. Create you configured item by progressing your order ATO Model line or running the Autocreate Configuration batch process.
5. Verify order and line status.
6. Create a supply order (dropship requisition) by progressing your configuration item line or running the Autocreate Dropship Requisition batch process
7. Run the Oracle Purchasing Requisition Import to create a purchase requisition.
8. Create a purchase order for the requisition.
9. Approve the purchase order.
10. Receive the purchase order.

Forward drop ship flow for ATO Item

1. Enter a sales order for your drop shipped ATO item
2. Schedule and book order (schedule date should default to request date for all lines).
3. Create a supply order (dropship requisition) by progressing your configuration item line or running the Autocreate Dropship Requisition batch process.
4. Run the Oracle Purchasing Requisition Import to create a purchase requisition.
5. Create a purchase order for the requisition.
6. Approve the purchase order.
7. Receive the purchase order.

Non-SMC PTO model with drop shipped standard options

1. Enter a sales order for your PTO model.
2. Select options; source type on the components will default.
3. Schedule and book the order.
4. Run requisition import to create a purchase requisition.
5. Create a purchase order for the requisition.
6. Approve the purchase order.
7. Receive the purchase order.

Drop Shipment (Technical)

This section is going to help those who asked to provide some more granular details for drop shipment some time back.

As discussed above and in last post drop shipment is the process by which an organization takes orders from their customer and gets it fulfilled by a 3rd party. The selling organizatoin places a purchase order to teh 3rd party (supplier) who ships the ordered products to the end customer directly. There are a large number of tables that contain data related to drop ship orders. For example:

• oe_order_headers_all and lines_all (order info)
• po_requisition_lines_all, headers_all etc.( req. info)
• po_headers_all, lines_all (po info)
• oe_drop_ship_sources_all (this table contains the link between the req, po and the original order)

Moreover, there are many more tables involved in this therefore its better to have a understanding by corresponding ER diagram.

There is always a need to develop some of the custom report, therefore understanding of understanding table is very very important. Here are the same of underline tables details.

• PO_LINE_LOCATIONS_ALL
  • This table stores document shipment schedules for purchase orders, purchase agreements, quotations, and RFQs.
• PO_LINES_ALL
  • This table stores purchase document lines for purchase orders, purchase agreements, quotations, and RFQs.
• PO_HEADERS_ALL
  • This table stores document headers for purchase orders, purchase agreements, quotations, and RFQs.
• PO_DISTRIBUTIONS_ALL
  • This table stores purchase order distributions.
• PO_REQUISITION_HEADERS_ALL
  • This table stores requisition headers.
• PO_REQUISITION_LINES_ALL
  • This table stores requisition lines.
• PO_REQ_DISTRIBUTIONS_ALL
  • This table stores requisition distributions.
• PO_REQUISITIONS_INTERFACE_ALL
  • This is the Requisition Import interface table.
• OE_ORDER_LINES_ALL
  • This table stores information for all order lines in Oracle Order Management.
• OE_DROP_SHIP_SOURCES
  • This table stores relationships between order lines in oe_order_lines_all table and associated oracle purchasing requisitions in PO_REQUISITIONS_ALL and Oracle purchasing purchase orders in PO_LINES_ALL.
• RCV_SHIPMENT_LINES
  • This table stores receiving shipment line information.

Drop Ship @Release 12
There are no Changes in R12 for Drop Ship Flow same as R11 only

Date flow for Drop Shipment

• Understand “Drop Shipment” in Order Management?

Reference Notes

• Note 225434.1 : Drop Ship FAQ document
• Note 130702.1 :Drop Shipments process